Quick Insurance Tips

This may not technically be a secret, but it is not well known even among insurance agents.  I was an agent for almost 20 years before I discovered that the default way to insure a family wasn’t always the cheapest or best way.

My wife figured this out when she worked briefly as my assistant.  She was calculating rates for a family that needed maternity insurance and investigated some options that I would not have.

She was carrying our child and had some extra time on her hands, so she helped out in the agency.  I think that was the last time that she had extra time on her hands.  We have a very health and active child now.

What she discovered is that putting the entire family on the same policy isn’t always the lowest cost way to insure them.  The Blue Cross Blue Shield policy with maternity coverage had some extra benefits on it that the rest of the family didn’t need.  We were able to save the family $200 a month by insuring the husband and the other child on a different policy.

My wife’s discovery led me to look for other situations where a family would benefit from being on separate policies.

There is a negative that should be addressed first. In many cases if a family has separate health insurance policies, they will pay more of their medical expenses.  Typically a family can only pay two deductibles regardless of how many people have medical expenses if they are all on the same policy.  With separate policies this isn’t the case.

The main reason that buying separate policies is sometimes less expensive than purchasing one family policy is based on the way a given health insurance company calculates the rates for a particular policy series.

The rating calculation for many policies is based on the company calculating the rates for each family member as if they were to be on separate plans and then simply adding the rates together.  With those policies you will pay the same whether you insure everyone on one policy or on separate policies.  However many companies will have family rates based on the age of the younger or older spouse.  This can be an advantage for some families and a disadvantage for others.

We now help our clients take advantage of the different ways companies calculate rates.  For example Blue Cross Blue Shield in Connecticut will calculate the rates for most of their policies based on the age of the younger spouse and the number of insured family members.  This means that the 60 year old woman who marries the 29 year old man is paying the same rate that a 29 year old woman would pay if married to the same man.  This is of course to her advantage.

However since this company doesn’t have a separate rate calculation category for single parents, a 12 year old girl would also pay the same rate as the 60 year old if she were insured on a policy with her father and there are no other family members on the policy.

In most scenarios a family will get the best price by insuring everyone on the same policy. But people who meet the following criteria may find that their rates are very different with different companies:

• Families with more than two children
• Couples where the one spouse is more than 5 years older than the other
• Families needing to insure two people only where one is a child
• Families needing to insure only a child or children
• Families with children where a parent is over 50

Usually big differences in prices are a big clue that there is a corresponding difference in quality.  However that isn’t always true.  Sometimes the difference is in how the insurance company calculates the rates.  I hope that this “secret” that my wife discovered helps you save money.  It has taught me once again how smart my wife is and reminded me that there is always something new I can learn about insurance if I’m willing to listen to smart people even if they are involved in another profession.